Companies, grow some fit morals

Easter's just passed, a time to think of higher things; such as whether capitalism can have a moral purpose.

This has become a more common question since the global financial crisis.

Some neoliberals say there is a moral purpose: enrichment. Only after capitalism and its associates, innovation and productivity growth, got going did whole populations climb out of subsistence. Before then the quality and quantity of life for the great majority of populations in the great majority of areas waxed and waned with the weather, war and other wayward factors.

Neoliberals have also argued that markets are inherently moral because they are how free individuals trade and make contracts and because that requires high levels of trust.

Roger Kerr, in a speech in 2008 based on a book of essays titled Moral Markets, said that in markets each person operates according to self-interest but that does not equate to selfishness, which would imply people would cheat and steal whenever they could get away with it. An "all-pervasive" "passive altruism" dissuades us.

Linked to this altruism is trust, also "so all-pervasive that we hardly notice it or appreciate how important it is". "Markets are intrinsically moral because they operate - and can only operate - on the basis of trust.

They therefore cannot be sites of pure selfishness and greed, which militate against trust."

Mr Kerr drew from this a moral for governments: "Excessive regulation undermines trust by crowding out the spontaneous individual willingness to behave in a trustworthy and co-operative way."

Mr Kerr did not explore the counterpoint: that inadequate, or inadequately applied, regulation was, according to most accounts, a significant contributor to some blatantly non-altruistic behaviour that tipped us into the crisis. Some people lacked Mr Kerr's spontaneous trustworthiness and co-operation.

Last month a resigning Goldman Sachs vice-president, Greg Smith, called his firm's culture "toxic". Mr Smith wrote in the New York Times of a "decline in the firm's moral fibre" over the past decade and of senior staff talking "callously" about "ripping their clients off".

This suggests some people in markets are a bit short on "passive altruism".

Mr Smith said this deficiency might ruin Goldman Sachs. But the damage is wider: those defective in altruism and trust also give markets - at least, the capitalist version of them - a bad name.

Here recent finance company trials have done that damage. Some in that sector were of the sort who would pick coins out of a beggar's hat (to reverse Mr Kerr's colourful illustration of what passive altruists don't do).

Actually, markets do not have an intrinsic morality. They are amoral. They are a means of exchange. Morality lies in the behaviour of those doing the trading.

Companies are members of society, as people are. Neoliberals say a company's focus must be on maximising returns to shareholders, which in turn maximises the company's contribution to society.

But in Wellington in late March Simon Longstaff of the Sydney-based St James Ethics Centre argued for a wider role. Companies are treated in law as "persons", with the privileged protection of limited liability if they go bust. That implies, Mr Longstaff said, an ethical or moral duty to the surrounding society.

That wider duty is implied in a new Government Bill to regulate loan sharks who fleece poor people. This follows National Samoan MP Sam Lotu-Iiga's drafting of a Bill last year and an earlier Labour Bill. Note also the raft of laws since the finance sector scandals and the tighter regulation coming for mines after the Pike River scandal.

Parliament is correcting for failures of altruism and trust.

The reason is that without ethical and moral glue a society of free people cannot hold together. Conservatives, who want a well-ordered society, know that well.

Some companies understand that, too. A well-functioning society is good business. Businesses have (self-)interests beyond the balance sheet.

So Business New Zealand is soon to co-sponsor with Every Child Counts a series of discussions on the "wellbeing of children". A reason: children badly brought up do not make useful workers later.

Some companies go further and try to act ethically in sourcing materials, in labour practices and in mitigating their environmental impact. They back or even require staff to take on some good works, some even in company time.

This can be good business both in staff satisfaction and building a good brand. And it is good citizenship.

But it can be hard going. The Economist of March 31 detailed United States fruit distributor Chiquita's efforts to behave ethically, only to be attacked by Canada for refusing to use tar sand oil and undermined by other companies that don't behave ethically.

The Easter message to those undercutters and to finance and mine companies and Goldman Sachs is simple: behave as decent members of society. But Easter nowadays is a holiday, not a source of moral uplift.

- Colin James is a leading social and political commentator.

 

Ethics in business

Colin James can clearly see further than Roger Kerr.  It is clear that ethics and morals are different things. Ethics are expected standards of behaviour which a person with moral standards will adhere too.   A business person without a sound moral base can, and often does, act unethically. The converse being that an ethical crook is still a crook.  Honour amongst thieves?